Do Not Fear Change: 2021 Goals

Last week I made a big announcement: I’m leaving my job. It’s FIOR time. We hit financial independence a full 7 years earlier than we first guessed five years ago, and more than a full year earlier than we projected in our 2020 goals. Amazing!

This is only possible due to the financial goal setting we’ve done over the past five years. It has truly changed everything. As we prepare for our future, we’ll keep setting annual goals and I’ll keep sharing. 

I’ve learned so much from paying attention to what others are doing. I hope these posts help you as well. If you’re struggling to get started you can also check out this list of personal financial goal examples. 

Quick note: I can’t write an opening 2021 post without acknowledging the seditious attack on the US Capitol last week. It doesn’t fit into this goals post, but as a proud American who served in the Marines, I can’t let it go unmentioned. It was treason. Our democracy is dependent on a peaceful transition of power – even when some may not agree with election results.

This Year’s Phrase

Every year, I try to pick a phrase that captures how I want to shift my mindset that year. Two years ago it was “progress, not perfection” as I worked on overcoming my perfectionism and letting the inexorable power of time work on my finances. That worked out well.

Last year was “optimism over cynicism” and wow was that a struggle in 2020. Enough said there.

This year, as I prepare to leave (at least temporarily) my multi-decade career in education and figure out what a life powered by the choices financial independence enables, I’m going with:

Do Not Fear Change

Now, as someone who has a healthy bias for action, change isn’t a strong fear for me. But this will be a major shift in identity. Perhaps the biggest challenge will be going from the security of a healthy annual salary to…something else. Given that feelings of financial insecurity still haunt me, this won’t be easy. (Check the spreadsheets, run the numbers, there is enough….check the spreadsheets, run the numbers…)

It’s a good theme for the year. I’ll write more about it later. This post is our annual goal declaration post.

As a reminder, we:

• Set goals annually
• Check numbers quarterly
• Do a “feel” check-in with each other monthly

You can expect this opening post, a quarterly review, and a year-end summary. My summary for 2020 will be coming next week.

This year, you’ll notice our goals have shifted substantially. We are shifting from our wealth accumulation phase to a maintenance period with our finances. We’ve got six months to tighten things up, and then we’ll start exploring the new reality. It’s exciting.

2021 Financial Goals

Long Range Goal: Avoid draw down of assets for next 3 – 5 years

We are already financially independent by most measures, so will be flexible with this goal. However, for the next few years we expect to cover our expenses through TFI’s salary and a set target for me to earn (still TBD). This will allow several more years of accumulation and perhaps move us from FIOR (financial independence optional retirement) to FatFire. 

We review and adjust these long-term goals annually, so it could quite possibly change. We’re just ahead of schedule, so this seems right. For now.

Goal 1: Tax Advantaged Investment

If you’ve followed my journey at all, you know I believe that tax-advantaged accounts are a real benefit for many educators. The last several years, we’ve built up to investing almost $100k a year using our tax-advantaged options. While you may not be able to do that, you should absolutely read about how I compare the 403b vs 457b and what my personal educator investing order of operations has been.

This year, we’re actually stepping back some from tax advantaged investing as we prepare for my loss of salary income in the second half of the year. 

We’ll emphasize the 457b because of the incredible ability to withdraw it penalty free anytime after leaving a job – not retiring or hitting a specified age limit. Since TFI may also walk early in the next few years, we’ll continue to fund hers as well. I’ll drop my 403b contributions substantially, but double up on my 457b contributions for the first six months of the year. She’ll continue investing 1/12 of the 2021 457b contribution limits per month.

For tax purposes, and because we have solid options, we’ll still put some in my 403b. I will, of course, fully fund my HSA since this is likely my last year of eligibility for that account. TFI isn’t eligible for HSA contributions.

We’ll also fund both our Roth IRA accounts this year. 

Lowering our tax-advantaged investing will free up money to invest more in accessible funds and prepare us for the second-half of the year where we’ll be (at least temporarily) on only one income. We still want to stack up investing though!

Altogether, our tax-advantaged goals for 2021 look like this:

Total annual tax-advantaged goal of more than $60k. Not bad as we move fully into financial independence.

Tax Advantaged: $63,600

Goal 2: Brokerage Investments

We made significant investments into our taxable brokerage accounts over the last few years. We automate monthly, then stretch and sweep at the end of the month any extra cash we’ve accumulated. 

We also put $500/month into a fidelity international index. That will continue for 2021 and we’ll reevaluate after. Selling our house and going mortgage free has freed up a lot and we were able to put quite a bit into our Vanguard funds in 2020.

It will be less in 2021, but our goal is to invest $20000 across our index funds balanced according to our target ratio.

Brokerage: $20000

Goal 3: Crypto Hedge

Don’t worry, I’m not going to go all crypto-bro on you. I’ve never been a big believer in gold, but think there is some interesting possibility with crypto assets. (I read the book Cryptoassets {affiliate link} this year and it helped me start to build understanding.)

I’m not advising anyone to invest in cryptocurrency (or anything – these are simply my choices!) but we made the decision that 1-2% of our total portfolio would be in cryptocurrency. We’ll drop just $1000 a month in there to add onto our current holdings. Depending on performance that will likely get us there. After that, it’ll just be part of our annual rebalancing.

Cryptoassets: $12000 investment

Goal 4: Establish Second Half-Budget

For the past several years, we’ve settled into doing an annual budget review but then not paying close attention the rest of the year. This year, we’ll have a significant income shift mid-year.

We’ll likely play it conservatively (as we often do) initially, but will want to use the summer and fall to establish our long-term spending goals and patterns.

So, we’ll exit 2021 with a clear budget for 2022 and a salary + extra income goal for us to hit the following year. This will take intentional action, which is why we are naming it as a goal for the year.

It is a big mindset shift to go from the wealth accumulation phase to a maintenance or drawdown phase. We’ll be learning a lot along the way.

Quarterly Goals/Actions

Normally, we set annual goals and then an equal number of goals/actions for the quarter. This has kept us moving forward and exceeding most of our goals. For the first half of 2021, we are drawing back on this for two reasons. 

First, we’ve made it to financial independence. It’s time to intentionally downshift our intensity a bit. This will be a challenge for the two of us. We’re both very goal-oriented. But we’ll do it!

Second, we are both hoping for a major shift in school status and the pandemic. We’ve been mostly in distance learning since March of last year. Over this next quarter, that’s likely to shift and we are eager to give our time, energy, and efforts to our jobs and students.

For those reasons, our short-term actions for the first quarter are simple.

Quarterly Goal 1: Adjust payroll withdrawals for 403b and 457b contributions

A simple action, but one that has to be done with our payroll offices. 

Quarterly Goal 2: Complete 2x Roth IRA contributions at $6000 each

 We”ll do this as soon as possible, once we’ve sorted out our taxes for the previous year. 2020 was financially complex enough, our taxes aren’t easily predictable.

Quarterly Goal 3: Establish Reserve Fund for Vacation Rental

I’ve written about how we turned one of our biggest lifestyle inflation purchases, a second-home, to revenue neutral. There are some larger expenses on the horizon and we haven’t adequately saved for those. As we move into this new phase, we need a reserve fund to prepare for future expenses when our income isn’t sufficient to wash it out.

Net worth goal: MET

We’ll still check-in on our net worth annually, but we’ll no longer set any goals related to it. One of my favorite phrases is “Once you’ve won the game, quit playing.” 

While we haven’t “won” by many measures, for our purposes the search for financial independence isn’t the same. We’ll keep up the good practice, but look for other games to play.

Summary – 2021 Goals

That’s a healthy set of goals, especially given the significant financial shift we’re looking at in 2021. Here they are in summary form.

Look for a progress post in April 2021. Next week, I’ll publish our final 2020 review.

Best wishes to all on a much better 2021!